Tesla Gets Closer to Electric Car for Masses With Battery Plant

To bring electric cars to the masses, Tesla Motors will transform an expanse of desert where pioneers passed on their way to the California Gold Rush and wild mustangs still roam the hillside.

This time, the rush will be in Nevada, which Tesla chose over four other states as the site for a $5 billion factory that the carmaker projects will crank out enough high-tech car batteries to power 500,000 vehicles annually by decade's end.

A state synonymous with gambling hit the jobs jackpot, Tesla has said the factory will employ about 6,500 people. That's a welcome jolt for a tourism-based economy particularly hard hit during the Great Recession.

Nevada's elected leaders still must deliver on the economic incentives they've promised, but if they do as expected, Tesla will open its massive factory at an industrial park outside Reno, according to a person familiar with Tesla's plans. The person spoke on condition of anonymity because no official announcement had been made. An announcement was scheduled for Thursday afternoon at Nevada's Capitol.

The biggest lingering question: How much has Nevada offered Tesla to locate here?

Based on CEO Elon Musk's public statements, the incentives likely total at least $500 million. Gov. Brian Sandoval would have to call a special session of the Legislature to approve tax breaks, grants or other incentives of that magnitude.

Sandoval's office wouldn't comment on the package his office negotiated, or anything else about the factory. A spokesman for Tesla Motors Inc., based in Palo Alto, California, said Musk would be at the Capitol in Carson City for the afternoon news conference, but offered no other details.

On Thursday morning, at least a half-dozen road graders, bulldozers and dump trucks were working at the Nevada industrial park behind locked gates. More than a dozen mustangs grazed nearby as sprinkler trucks worked to keep down dust.

Tesla's choice of Nevada over California, Texas, Arizona and New Mexico takes it a big step closer to mass producing an electric car that costs around $35,000 and can go 200 miles on a single charge. That range is critical because it lets people take most daily trips without recharging, a major barrier to the widespread adoption of electric vehicles.

The "gigafactory," as Tesla calls the project, would bring down the cost of batteries by producing them on a huge scale. Its approximately 10 million square feet, equivalent to about 174 football fields, would be running by 2017. That is when Tesla hopes to introduce its Model 3, which will be about half the price of Tesla's only current offering, a luxury sedan.

At present, demand for electric vehicles is small.

Through August, automakers have sold just over 40,000 fully electric cars this year, up 35 percent from a year ago, according to the auto website Edmunds.com. Factoring in plug-in hybrids, electric vehicles still account for just 3.6 percent of all new car sales, a slight drop from last year. Still, government fuel economy standards that will require new cars and trucks to average 54.5 miles per gallon are expected to drive sales.

Tesla's goal of producing batteries for 500,000 vehicles annually by 2020 has its doubters.

A recent report by Lux Research, a consulting firm, projected that Tesla would sell 240,000 electric vehicles that year, meaning "significant overcapacity" for the factory.

Then again, the factory could be tooled to produce batteries for laptops, phones and even buildings, which could draw on battery power during peak-cost times of day and then recharge them either through solar power or energy drawn from a utility during lower-cost periods. Japanese electronics company Panasonic Corp. is a major co-investor, and will be responsible for the actual manufacturing of the battery cells.

This spring, Musk announced that the company would take the unusual step of spending millions to prepare sites in two states, or perhaps even three, before choosing a winner. The person familiar with Tesla's plans told The Associated Press a second site still will be prepared, in case Nevada is unable to deliver the incentives it has promised, or possibly to build a second factory.

Tesla has done excavation and other site-preparation work at the Tahoe Reno Industrial Center, where it plans to build the factory. The center is about 15 miles east of Sparks, a Reno suburb founded as a railroad town more than a century ago.

Aside from low tax rates and business-friendly workplace laws, Nevada offered plenty of sun and wind to generate "green" power. The industrial park is only about 200 miles along Interstate 80 from Tesla's lone auto assembly plant in the San Francisco Bay Area. It's also near a deposit of lithium, an essential element to produce the battery cells.

U.S. Senate Majority Leader Harry Reid, D-Nev., said Thursday that this ready supply was an important part of Nevada's bid. He acknowledged at his Clean Energy Summit in Las Vegas that Tesla was coming to Nevada, and said he had spoken with Sandoval about it.